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3 November 2018updated 03 Sep 2021 12:39pm

The fintech company shredding fine art to bits

A new blockchain-enabled platform is cracking open the art market for investors, but does it leave room for aesthetics? 

By Augusta Riddy

Leonardo da Vinci’s Salvator Mundi sold at Christie’s for $450m last year, and even the most hawkish market players were shocked. For the wealthy, art collection can be a source of both prestige and impressive returns. The Art Basel and UBS Global Art market report estimated that the global art market was worth $63.7bn in 2017. But can a business that sells 500-year-old paintings ever catch up with the pace of modern fintech? 

Marcelo Garcia Casil is happy to admit he didn’t know much about art when he entered the business. He was, he says, “attracted by the way the art market worked… I realised it was hugely inefficient”. He founded Maecenas, an online art investment platform, to allow investors to get in on the high value art game without having to put up $450m for a da Vinci. Casil’s reasoning is that the fine art market is an attractive and age-old investment prospect that offers the opportunity to make a lot of money but, so far, this has been limited to a select few.

Maecenas is not for people who want to buy art for art’s sake. The platform identifies “investment-grade artwork” that is, at around £5m per piece, unaffordable to the investors they are targeting. “The price range of the artworks that we bring to customers is not really something that investors could own and have hanging on the wall,” Casil says. Instead, Maecenas uses blockchain technology to split some or all of the artwork into shares, which are then auctioned off to investors. 

To do this, the company created its own cryptocurrency, called ART. The currency is based on the Ethereum public blockchain, on which Maecenas runs its auctions. “It’s like having your own arcade or amusement park, where you had to buy chips to play.” ART can be accessed through a range of currencies, including Bitcoin, Ethereum, or USD: “We calculate the price,” Casil explains, “we quote a number of ART equivalent, then we allocate [it] to them.” Once the auction is over, the ART is converted back into the investors’ chosen currency. 

In September, the company successfully carried out its first online auction, of the 1980 Andy Warhol painting 14 Small Electric Chairs. The original owner kept a 70 per cent stake, and 30 per cent of the work was “tokenised” into shares, which collectively raised $1.7m. This kind of partial sale is the company’s current model, Casil explains, but they “may explore the 100 per cent sale model.” One hundred people participated in the auction, but Maecenas is looking to expand that number, and lower the price of the minimum bid. “On the first auction, we restricted the number of participants to 100 because we wanted to be in full control of the process … [so] we had to set a relatively high minimum of $5,000 US dollars. Long-term, our objective is to bring this number down as much as we can.”

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Considering the value of these works of art – the Warhol painting has an overall valuation of US$5.6m – and the fact that the strength of the art market doesn’t show much sign of abating, holding a $5,000 share in such a piece might seem like a stable and attractive investment. For Maecenas, it’s a business model that allows small investors to take part in a notoriously closed-off industry. “It’s more probable to find hundreds of people who are willing to invest, say, $10,000 each for an artwork, than a single buyer having the cash available.”

Centuries-old auction houses such as Sotheby’s and Christie’s dominate the art market; Sotheby’s has an annual sales turnover in excess of $4bn. These houses also charge considerable purchasing fees – between 13 and 25 per cent, depending on the sale price – which Casil argues puts off more dynamic investors who aren’t necessarily planning to hold onto the pieces for long. “If you want to give the option to investors to take fine art seriously as something they could have in their portfolio, we need to lower the fees.” Another reason why Maecenas uses blockchain technology is because it incorporates a ledger. “It’s very good at tracking ownership, and change of ownership, so by using blockchain we do away with all the manual work and all the overheads, and we can make this type of transaction very low-cost and almost instant.” As such, the platform charges two per cent to investors, “in line with what they would typically pay if they want to invest through a fund”.

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Has the platform ruffled any feathers? Have any purists accused Casil of taking the pleasure out of art collection? After all, it doesn’t result in owning the physical piece. “That’s been said to us,” he admits. But, he argues, it’s time to shake things up a bit. “There are already plenty of companies who facilitate purchases of art; we don’t feel there’s an opportunity for us in that market.”

The collector Charles Asprey says that an operation of this kind is “a major misunderstanding of the concept of luxury” and creates a transactional relationship that does little to benefit art. “It’s been long established that acquiring art is a luxury, but the luxurious part of that process was the seeking-out of the object, its celebratory return to one’s home and then the display, the big reveal. That was evidence of being enlightened, when the link between wealth and the importance of support for the arts was understood.” He says that a “sad logic” is emerging “to art becoming just another asset class, de-emotionalised, locked away, safely stored in warehouse and on a spreadsheet.” It is, he concludes, “a hollow commitment.”

As an asset, too, blockchain stakes in art share a drawback with many cryptocurrencies – they are not as easy to cash out as they are to buy. Shareholders can privately sell their share to another investor, as they would a painting, or a buyer can make an offer for all the shares at once – buying what Casil calls, a little oddly, “the physical underlying painting”. 

Maecenas is also looking into creating a trading platform “where investors owning shares in the artwork can buy and sell them from each other, similar to how people buy and sell stocks in companies.” As with owning a share in a company, investment offers little, if any, access to the physical entity itself, and limited control over anything other than its speculative value – something that is, in art, underwritten by not much other than collective opinion. 

Maecenas, then, is calling the industry’s bluff. In Casil’s world, art isn’t special; it’s an asset, and people want in. They may not even like art that much. “Our argument is, if you invest in art purely for enjoyment, then this is not for you.”